Monthly Archives: August 2009

James Fontanella-Khan

(Please note there will be no Source email today due to the UK bank holiday. Full service will return on Tuesday September 1)

Commodity traders signal lift for prices
Commodity trading houses upbeat on economic growth (FT)

Nymex defers gas trade limits
Move follows protests from one of its largest customers (FT)

Gush of oil is music to Indian ears
Cairn targets Rajasthan for growth (FT)

EDF charged With complicity in Greenpeace spying probe
Europe’s biggest power producer was charged with cooperating in a crime (Bloomberg)

Lower oil prices hit Lukoil’s net
Russia’s second-biggest oil producer said profit down 44% (WSJ)

Kate Mackenzie

Number of the week:


- The EIA’s forecast for total natural gas stored in the US by the end of October (in billions of cubic feet)

Quote of the week:

In this industry, there was no need to feign love; grudging respect would do.

- Peter Maass’ less-than-complimentary report from an oil industry dinner featuring then-Exxon chief executive Lee Raymond

Image of the week: China’s carbon emissions

- H/T China Environmental Law

Kate Mackenzie

On FT Energy Source:

Markets: Crude leads commodities higher

Natgas cars get a boost

Heritage Oil unpleasantries

How the history of oil becomes an argument over its future

Further reading:

Washington Post survey finds Obama is rather popular on energy policy, with 55 per cent in favour of recent efforts. Full data here (Washington Post)

The economy’s reliance on oil is another argument in favour of a prolonged and shallow recovery (The Economist)

A look at Camelina, a biofuel crop used in the Japan Airlines test flight (Bit Tooth Energy)

Morgan Downey’s history of 150 years of oil (The Oil Drum)

T.Boone Pickens’ hedge fund concentrates on energy, drops basic materials (SeekingAlpha)

Titusville marks 150th anniversary of first successful oil well (Pittsburgh Post-Gazette)

Natural gas may hit $1 in Canada, says analyst (National Post)

The case against <2 degrees of warming (John Quiggan)

Commodities prices rose on Friday, with crude oil firming well above $70 a barrel on the back of optimism about the global economic growth and US dollar weakness.

“Market participants attribute these steep gains to economic optimism and rising equity markets,” said Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt. “Fundamental data do not justify the current oil price level, however, and we expect a sharp price correction for crude oil in the foreseeable future.”

In early trading, Nymex October West Texas Intermediate, the US benchmark, rose 71 cents to $73.20 a barrel, recovering from Thursday when it briefly tested the $70 a barrel support. ICE October Brent, the European benchmark, rose 73 cents to $73.24.

Kate Mackenzie

As the CFTC decides whether to introduce more position limits on energy traders, a paper from Rice University’s James A. Baker Institute for Public Policy cuts to the chase. The main reason for hating speculators is high prices, especially when they move rapidly higher. So why not release all those barrels of oil in the Strategic Petroleum Reserve?

From Dow Jones via Rigzone:

The U.S. and other major oil consumers made a mistake last year when they decided against releasing oil from reserves as prices were skyrocketing, the study said. That inaction gave speculators the green light to hold positions in the oil futures market betting that prices would keep moving higher.

In fact, reluctance to use the reserves could have made matters worse.

Kate Mackenzie

Heritage Oil is hoping to consumate its $6bn merger with Turkey’s Genel Energy and become the niftily-named HeritaGE. An agreement was reached earlier this month on one of the biggest hurdles, Genel’s $1.1bn liability to the Kurdistan Regional Authority: Genel’s investment would provide some of the infrastructure needed to capitalise on Heritage’s holdings in Kurdistan and Uganda.

But what’s this in Heritage’s interim results today?

Heritage has recently been made aware of an investigation by the Financial Services Authority (“FSA”) that could potentially affect the ability of certain members of Genel’s operational management team to assume their proposed roles in the combined entity. Heritage understands that relevant members of the Genel team are assisting the FSA with a view to bringing this matter to a swift conclusion. Heritage will update the market on these issues when it is in a position to do so.

The shares were off as much as 7.8 per cent this morning.

Related links:

Heritage: In for a penny, in for a pound in Kurdistan (FT Energy Source, 04/08/09)
Heritage and Genel unveil $6bn merger (FT, 09/06/09)

James Fontanella-Khan

Jakarta eyes 40% cut in emissions
Indonesia seeks ambitious target, international support (FT)

Cart before horse
Solving climate change is about engineering, not maths (FT)

Estimated cost of climate adaptation soars
Scientists put price tag far higher than previously estimated (FT)

Crude oil prices rebound as US gas falls to low
US natural gas touched a multi-year low (FT)

Deutsche Bank sees natural gas weak long-term
Demand weak even in face of widespread fuel switching (Argus)

Qatar urges OPEC to keep oil output quotas unchanged
Weak world economy cited as reason to keep targets (Bloomberg)

Myanmar seizes rebel-held town near China oil and gas projects
Concerns raised for planned oil and gas projects in region (Bloomberg)

Kate Mackenzie

It’s 150 years since oil was first drilled. Do you…

a) Write a long piece for a respected periodical, reflecting on your Pulitzer-prize winning book, increased volatility and state-control of oil, and the folly of peak oil?

b) Run an oped by a well-known critic of peak oil, criticising peak oil?

c) Write an angry rebuttal of said oped, and let the debate unfold?

d) Invite the author of said oped to a long-term bet on oil prices settling at $40?


a) Yes – if you are Daniel Yergin

b) Yes – if you are the New York Times/Michael Lynch

c) Yes – if you are The Oil Drum

d) Yes – if you are Joe Romm

Kate Mackenzie

On Energy Source:

How effective are speculative limits in commodities, anyway?

Slime: The friendly face of geo-engineering

Markets: Inventory gains leave markets lower

Natural gas: Not so unstoppable after all

Further reading:

Cantarell production fell by half between January and July, and it could be finished by the end of next year (Gregor)

How renewable energy expansion could create ‘energy sprawl’ (NY Times)

Oh the irony: Will an old Ford plant be converted into a $1bn renewable manufacturing showcase? (Detroit Free Press)

That natural gas storage trainwreck… (Houston Chronicle)

China plans 500MW solar plant (CNet)

Excitement and trepidation over Uganda’s oil wealth (Guardian)

US utility seeks grant for biggest ever grid storage battery (Reuters)

By Izabella Kaminska

As has been well-publicised, the Commodities Futures Trading Commission (CFTC) is considering increasing position limits in energy commodities trading, on the perception that large speculative inflows may have contributed to last summer’s epic oil price-moves.

Whether speculators were indeed to blame, however, is still being hotly debated — as, for that matter, is the question of how effective position limits on non-commericial entities might actually be in curbing volatility.

Yet there is a precedent to look to.

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